The performance of insurance companies' commercial mortgage investments posted gains as losses declined and risk levels mitigated on improved real estate fundamentals.

Insurance companies representing nearly half of the industry's total mortgage exposure, with $135 billion in combined commercial mortgage assets, took part in the Trepp/CRE Financial Council Portfolio Lender Survey.

The survey took into account the companies' data from the first quarter and second quarter of 2012, covering both the general account and any subsidiaries, including sub-performing or non-performing loans.

"These results provide clear evidence of extremely solid investment performance within insurance company portfolios," said Todd Everett, managing director and head of real estate fixed income at Principal Real Estate Investors and chair of CREFC's Portfolio Lenders Insurance Company Sub-Forum.

He added, "They also demonstrate the reasons we are seeing increasing allocations in commercial mortgages from this sector."

The average commercial mortgage holdings of all companies surveyed reached 10.70% of total invested assets, ranging from a high of 17.28% to a low of 4.04%.

In year-end 2011, 83.24% of realized losses came from first mortgage investments, 14.10% from subordinated debt instruments, and 2.66% from construction loans. The second quarter data from 2012 demonstrated realized losses being comprised entirely of first mortgage investments.

The severity of realized losses for insurance companies averaged 7.70% of the par balance for first mortgage investments, a 1.49% drop from last year.

Office property type accounted for 49.62% of all realized losses, followed by retail at 23.75%.

Multifamily experienced a steep drop in realized losses, declining by 19.62% from 23.43% in 2011 to 3.81% in 2Q 2012.

Total loan delinquencies — 30 days or more — within general account holdings and subsidiary entities averaged 0.35%, down 8 basis points from a year earlier.

Fitch Ratings reported commercial mortgage-backed securitization delinquencies also continued to decline for seven consecutive months.

CMBS delinquencies fell 18 basis points last month to 7.99% from 8.17% a month earlier.

In December, resolutions of $1.7 billion outpaced additions to the index of $1 billion. Additionally, $4 billion in new Fitch-rated deals closed for the month.

Multifamily delinquencies dropped the most of any major property type, starting the year with a 14.42% delinquency rate and falling 430 basis points to close out 2012 with a 10.12% delinquency rate.

Office loans were the poorest performers last year and remain a cause for concern in 2013, Fitch said.

Office delinquencies began the year at 6.84%, but rose 157 basis points to close out 2012 at 8.41%.